Watch Out: Reality Is Set To Explode

Walk into any store right now (December 2016), and you can probably find a VR headset for $20. These will be a popular gift item this holiday season, but ultimately it may hurt the market if consumers have bad experiences with these bargain-basement VR headsets.

There exists a considerable amount of confusion regarding the virtual reality, augmented reality, and mixed reality industries. Semico calls this, collectively, the Enhanced Reality market. They differ in how they present (or not) the digital world and the real world.

With virtual reality, a user wears a head-mounted display that immerses them in an artificial world. VR can include 3D audio and controllers to interact with the artificial world. VR headsets are more focused on entertainment, but are also used in design and training. An example would be the Oculus Rift, owned by Facebook and shown below.

Figure1. : Facebook’s Oculus Rift VR HeadsetSource: Facebook

With augmented reality, the headset takes the user’s current view of the real world and adds a layer of information/data onto it. AR is focused on adding utility (directions, text notifications) to the user experience rather than immersion. There are lots of applications in the enterprise, military, and law enforcement markets. An example of AR is Google Glass (pictured below), which failed as a consumer device in January 2015.

Figure 2: Google Glass Augmented Reality HeadsetSource: Google

Mixed reality mixes aspects from both VR and AR. The user can see the real world along with virtual objects that are anchored to a point in real space (like something sitting on a table — if you lean toward it, it gets closer to you). An example device is the Microsoft HoloLens, shown below. These devices are still in development but could be the long-term winners of the enhanced reality market.
Figure 3: Microsoft HoloLens Mixed Reality HeadsetSource: Microsoft

What is Virtual Reality?
Development of virtual reality technology has existed for decades. But the most recent iteration of the virtual reality industry is so new that there is a lot of variety in the models available. They also vary by cost and by input. Some contain a slot to insert a smartphone (untethered), while others connect via a wire to a PC or game console (tethered). The smartphone-based systems cost less because the smartphone is relied upon to do more of the processing and display work.

For tethered systems, some connect to PCs, others to the PS4 or the Xbox. Desktop PCs need to have dedicated graphics cards and lots of memory. Oculus-Rift-ready bundles (headset + PC) sell for between $2,000 and $3,000.

The holy-grail design for a VR headset would be wireless and not require external sensors or a dedicated PC. Mark Zuckerberg’s long-range goal is to implement VR and AR in a traditional eyeglasses form factor, rather than a headset; this basically is mixed reality.

Google Cardboard and Cardboard-compatible devices are an inexpensive way to try out VR with an outlay of only $15 to $30, plus the smartphone you already own. These headsets are made out of mostly cardboard, plastic, or even aluminum, and include plastic magnifying lenses. Google’s spec forbids straps, so this is a device that is not meant to be used for long periods of time.

Oculus Rift is the current success story of the VR industry. Entrepreneur Palmer Luckey launched a Kickstarter campaign for the Oculus Rift in 2012. Two years later, Facebook purchased Oculus for (U.S.) $2 billion. Facebook plans to add social media features to the Rift, including Facebook Messenger (video calls and selfies) and Rooms and Parties (virtual hangout with up to eight friends). The Oculus Touch controller ($199), which debuted in December 2016, allows users to manipulate virtual objects. Touch will bring support for VR games like Mission ISS, Robo Recall, and Arktika.1. Also available this month are $49 Oculus Earphones with advanced noise isolation optimized for VR.

Outlook
There is a tremendous amount of development work, content, industry partnering, and venture capital going into the Enhanced Reality market. Semico believes the form factors will be further refined, the technology will continue to improve, and Enhanced Reality devices will take off. For more on VR, AR, and MR, see Semico Research’s brand-new report: What Will the Future of Reality Be: Virtual, Augmented, or Mixed? Contact Rick Vogelei for more information.